According to FX Strategists at UOB Group, the bearish note in USD/JPY is expected to lose impetus if 105.20 is regained in the next weeks.
Key Quotes
24-hour view: “Our expectation for USD to consolidate yesterday was wrong as it dropped to a low of 103.99 before rebounding strongly. Downward pressure has more or less dissipated and USD is likely to trade sideways for today, expected to be between 104.20 and 104.90.”
Next 1-3 weeks: “We have held a negative view in USD since early last week and in our latest update from last Thursday (17 Sep, spot at 105.00), we highlighted that ‘the outlook remains weak’ and we were of the view that ‘the July’s low of 104.16 may be out of reach this time round’. However, downward momentum has been stronger than expected as USD dropped to a low of 104.25 last Friday. From here, USD could dip below 104.16 but oversold conditions suggest that a sustained decline below this level is unlikely (next support is at 103.80). All in, the weakness in USD appears to be overstretched but only a break of 105.20 (‘strong resistance’ level was previously at 105.50) would indicate that the negative phase has run its course.”
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